Ted Williams was a terrific ball player, but he had one tactic that many found…questionable. He almost never swung at the first pitch.

Many short term traders and individual investors could take a lesson. The market has been dragging sideways for weeks. Volatility is low. There’s a great temptation to force in a few trades. It can be difficult to resist.

As we often discuss, successful investors have a system – and they stick to it. That is as true for periods of low volatility as it is for any other market phenomena. Ben Carlson covered this topic recently, calling it “the hardest question in portfolio management.” He opens with a quote by Jim O’Shaughnessy:

“If you don’t have the discipline to stick with your underlying strategy particularly when it’s not going in your favor, it’s nothing. It’s data on a page.”

If you want to match the Splendid Splinter,  you must take what the market is offering. Wait for the right pitch.

This week, we’re joined by Chuck Carnevale himself. Chuck is one of our favorite sources of market wisdom and stock ideas, with a heavy focus on long-term earnings trends, cash flow, and balance sheets.

Review

Our last Stock Exchange considered how to trade a market with a lot of headline risk. If you missed it, please check back and catch up on this important topic.

Market Tech Take

Last week we introduced our proprietary indicator, the market health index (MHI). This is a specialized combination of breadth and strength in our own trading universe. The index remains strong. For contrast, we are looking for alternative technical measures. What is your own favorite indicator?

Let’s turn to this week’s ideas.

This Week—Finding Trading Ideas in a Low Volatility Market

Holmes

Holmes: Proofpoint Price (PFPT) is my pick of the week. The price on this one has been shifting sideways for months, which creates an attractive buying opportunity.

PFPT pricing is down near the 200 day moving average, and the stock 12% off its all time highs. I’m confident we could see significant gains here over the short term.

Chuck: As a fundamental long-term oriented investor, I like good businesses.Proofpoint is a young mid-cap company with a lot of debt and a weak earnings record.But operating cash flows have historically been growing at enormous rates.Based on cash flow growth, this company looks inexpensive for a high-growth stock. Free cash flow growth has been even better and the company also looks attractively valued based on this metric.